2008-09 Budget Strategy

Presented by Mayor Don NessTo the Duluth City CouncilJune 9, 2008

Today’s Presentation Introduction – Mayor Ness Sample list of proposed budget strategies

– Mayor Ness Budget principles – Lisa Potswald Operational restructuring – Lisa Potswald Income statements – Mayor Ness What are our next steps – Mayor Ness

Proposed Budget Strategies Eliminate or hold open 33 positions Close Human Rights Office Eliminate DEDA general fund subsidy Eliminate Office of Sustainability Turn over Zoo operations to Zoological Society Close Fire hall Eliminate Engine 3 Fire Rig Combine Parks & Library Departments Reduce Aquarium Subsidy by $100k

Proposed Budget Strategies -

Continued Close Washington Pool Eliminate City Run Adult Leagues Reduce fuel consumption by 15% Reduce size of rolling stock fleet CD, WD, PACT all pay rent & expenses Eliminate Fun Wagon service – sell asset Close 1/3 of Community / Recreation Buildings HIF funds used to support SSO Issue

Proposed Budget Strategies -Continued Eliminate support for Sister Cities, Grandmas

Marathon, Beargrease and Inline Marathon Transition to pay as you go for capital equipment Transfer responsibility for Senior Nutrition Program Implement Administrative Fine System Eliminate Staff support for many City Boards and

Commissions Reform Civil Service Process Retiree Health Care / Medicare

Budget Principles

Principle #1: Fiscal DisciplineComponent Status

1. Control over total expenditures

Line item analysis of each department’s budget as compared to prior years

Analysis of affect of cost drivers; adjustment as needed

2. Capture revenue Examine best practices in other municipalities and adopt as appropriate

3. Transparent and accountable allocations

Examination of all budgets for consistency and accountability

Principle #2: Effective Resource Allocation

Component Status

1. Improve linkage between policy, planning and expenditures

Redeploying resources from lower to higher priorities

2. Determination of priorities

3. Longer than 1 year timeframe

Multi-year realistic budget information and ceilings

Principle #3: EfficiencyComponent Status

1. Deliver services at the lowest possible cost

Implementation of efficiency measures and benchmarking

2. Transition from top-down bureaucratic to citizen-focused services

Improved citizen input and service realignment

Operational Restructuring

Restructuring and Reform City government can no longer afford to provide

services that could effectively be accomplished by other organizations/individuals.

The goal today is to present a plan for restructuring and controlling costs, not just listing cuts

The next step will be to develop comprehensive plans for implementing change.

Prerequisites for Restructuring

Prerequisite Status, budget process

1. An accessible and comprehensive management information system

New World update: position control, employee benefits, E-suite; other finance system enhancements

2. Improved budget processes and accountability

Budget realignment; full allocation and hard budget constraints by 2010

Prerequisites continued

Prerequisite Status

3. Implementation of program budgeting

Identification of programs and performance measurements to take place in 2008

4. Development of real performance measurement capacity

5. Removal of impediments to reform

Civil Service reform

Prerequisites continuedPrerequisite Status6. Implementation of customer-driven outlook

Develop plan for customer surveys and focus groups in 2009

7. Clear definition of goals Business planning process and work with Council on business plans for 20098. Better reporting to

policy-makers

9. Stakeholder participation and buy-in

Much more work needed with employees and public to identify priorities

Income Statements

Income Statement - Reserve 2008 Beginning Fund Balance $1,086,000

Current Year ChangesSale of Steam District II $2,500,000Other one time revenues 500,000

2008 Estimated Ending Balance $4,086,000 *

* Meets 5% minimum fund balance target; long term goal is to have 7% to 10% in the General Fund undesignated, unreserved fund balance.

Income Statement – Operational Deficit 2008 General Fund Operational Deficit $4,420,000* Recommended Budget Strategies

Positions held Vacant $1,403,000 Impact Neutral Revenue $363,000 Revenue Increases $330,000 Eliminated Subsidies $100,000 Eliminated Outside Agency Support $680,000 Efficiencies/Managerial Changes $187,000 Eliminated Services/Activities $435,000

Total of Strategies $3,498,000

Current 2008 Operational Deficit $(922,000) *Includes Fund Balance Restoration of $1 Million

2008 Total General Fund Impact

Restore Reserve $3,000,000 Operational Strategies $3,498,000 Remaining Deficit $ 922,000

Total Recovery by Year’s End $7,420,000

Income Statement – 2009 Initial 2009 General Fund Operational Deficit $8,360,000

2008 Permanent Fixes $3,379,000 Current 2009 Operating Deficit $4,981,000

Recommended Budget Strategies Neutral Revenue Efficiencies $750,000 Revenue Increases $750,000 Recovery of Cost for Services $200,000 Eliminated Outside Agency Support $300,000 Efficiencies/Managerial Changes $2,000,000 Eliminated Services/Activities $1,000,000

Total of Strategies $5,000,000

Additional StrategiesLists developed from ideas provided by

the administration, staff, union representatives and the public

Expense reduction/revenue enhancement list

Eliminated services/task list Operational efficiencies/managerial

improvements list

Next Steps

Next Steps Budget resolution will be presented on

June 19 Develop and implement plans regarding

each of the recommendations Work with community groups to clarify

implications for 2008 and beyond Educate the public regarding service

reductions and process changes

Questions?